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BAXTER BARRED FROM NEW/RENEWED CONTRACTS WITH NEW YORK STATE

This article was originally published in The Gray Sheet

Executive Summary

BAXTER BARRED FROM NEW/RENEWED CONTRACTS WITH NEW YORK STATE, the state's comptroller, Carl McCall announced October 4. "I am ...notifying [state] agency counsels that no agency may enter into or renew any contract with Baxter International or its affiliates," McCall said. McCall disapproved six contracts worth more than one million dollars between state agencies and affiliates of Baxter International Corp. The Comptroller explained that It state law is quite clear. Contractors doing business with the state are banned from participating in any international boycott prohibited by federal law. Baxter has admitted to providing information to Syrian officials. That violation of the federal statute mandates that we take this action." McCall cited Baxter's guilty plea in March to violating the Federal Export Administration Act ("The Gray Sheet" March 29, I&W- 5) as grounds that Baxter also violated New York labor and finance laws. "Several Baxter affiliates signed contracts that included a clause affirming Baxter had not and would not participate in the Arab League boycott of Israel. Those contracts were signed with full knowledge that Baxter had violated that clause. Baxter breached the terms of the contracts and must suffer the consequences," McCall said. McCall has ordered a hearing, scheduled for October 13, to determine if 22 existing Baxter contracts with the state should be voided. Baxter has another 11 contracts with the state that expire shortly and will not be renewed by the state, according to the comptroller's office. The state made purchases valued at more than $11 mil. from Baxter and its affiliates during the 12 month period ended Aug. 31. In a letter to the legal counsels of every New York state agency with existing Baxter contracts, the comptroller's counsel said it will, "pending the completion of the hearing process, honor vouchers for purchases which are currently in the pipeline." However, the counsel "[encourages]" the agencies "not to make any further purchases which would otherwise be made from Baxter or one of its affiliates where any such purchase can legally be obtained elsewhere." The comptroller's office said that the state may have to purchase certain Baxter products if the company is the sole source of those products. In a letter to Baxter affiliates, the comptroller's counsel informed the companies of their right "to dispute [their] ownership by or affiliation with Baxter International, Inc. and [their] right to present evidence concerning the possible costs and effects on the state and the contractor if the contract were to be terminated." Baxter said it has asked for a meeting with the state comptroller to present its position that the state should not cancel contracts with the firm. Baxter maintains that the intent of the New York statute is to forbid contracts with companies that engage in economic boycotts of Israel. The firm asserts that both its long history of business in Israel and the $6 mil. in products it sold to Israel last year support its claim that the company did not participate in any economic boycott of the country. New York state's action is the latest in a series of Baxter contract cancellations. In August, the Department of Veterans Affairs suspended for one year the firm's eligibility to renew existing agreements and compete for new contracts with all government agencies ("The Gray Sheet" Aug. 16, p. 1). The VA and the Army, however, have granted the firm certain exceptions to that suspension ("The Gray Sheet" Aug. 30, p. 24). Baxter also lost up to $50 mil. in annual business with Premier Hospitals Alliance earlier this year ("The Gray Sheet" May 31, p. 4).
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